No Tax on Overtime calculator

What is a “No Tax on Overtime” calculator?

A “No Tax on Overtime” calculator estimates how much of your overtime pay is treated as federally tax-deductible under the 2025 U.S. rule, and roughly how much income tax that could save you. It turns five simple inputs — your hourly wage, your regular hours, your overtime hours, an overtime multiplier, and your marginal federal income tax rate — into five results: your regular pay, your overtime pay, the tax-exempt overtime premium, the estimated tax saved, and your gross pay for the period.

The key idea is that not all of your overtime pay is exempt — only the premium portion is. This calculator separates that premium from the rest so you can see the piece the rule actually applies to. It is an educational estimate, not tax advice.

What does the “No Tax on Overtime” rule cover?

Under the Fair Labor Standards Act (FLSA), covered employees earn at least 1.5 times their regular rate for hours worked beyond 40 in a week — the familiar “time and a half.” That extra pay has two parts: the regular hourly rate you would have earned anyway, plus a premium on top (the “extra half”).

The 2025 One Big Beautiful Bill Act (OBBBA) introduced a temporary federal deduction commonly called “No Tax on Overtime.” Importantly, it applies to the FLSA overtime premium — the portion of overtime pay above your regular hourly rate — not to your entire overtime paycheck. For time-and-a-half, that premium is the “half,” i.e. 0.5 × hourly wage for each overtime hour. This calculator models the deductible amount as that premium so the estimate matches how the deduction is defined.

Because it is a federal income tax deduction, it does not remove Social Security or Medicare (FICA) taxes, it does not change state or local taxes, and it is subject to income limits and caps set in the law. Always confirm the current rules and your own eligibility with an official source or a tax professional.

How does the calculator work?

You provide:

1. Hourly wage — your normal pay for one hour of regular work.
2. Regular hours — the hours you worked at your standard rate.
3. Overtime hours — the hours you worked beyond the regular threshold.
4. Overtime multiplier — how much more each overtime hour is worth (1.5 by default).
5. Marginal federal income tax rate — the tax rate that applies to your next dollar of income (as a percentage).

The calculator then splits your pay into regular and overtime pay, isolates the tax-exempt premium, applies your marginal rate to that premium to estimate the tax saved, and adds regular and overtime pay into your gross pay.

Formulas

Regular pay covers the hours worked at your standard rate:

$$\text{Regular pay} = \text{Hourly wage} \times \text{Regular hours}$$

Overtime pay covers the extra hours at the higher rate:

$$\text{Overtime pay} = \text{Hourly wage} \times \text{Multiplier} \times \text{Overtime hours}$$

The tax-exempt overtime premium is only the amount above your regular hourly rate:

$$\text{Exempt premium} = \text{Hourly wage} \times (\text{Multiplier} - 1) \times \text{Overtime hours}$$

Gross pay is the sum of regular and overtime pay:

$$\text{Gross pay} = \text{Regular pay} + \text{Overtime pay}$$

The estimated tax saved applies your marginal rate to the exempt premium:

$$\text{Estimated tax saved} = \text{Exempt premium} \times \text{Tax rate}$$

Examples

Example 1: Time and a half

Suppose you earn $20 per hour, work 40 regular hours and 10 overtime hours at the standard 1.5 multiplier, and your marginal federal rate is 22%:

$$\text{Regular pay} = 20 \times 40 = \$800$$ $$\text{Overtime pay} = 20 \times 1.5 \times 10 = \$300$$ $$\text{Exempt premium} = 20 \times 0.5 \times 10 = \$100$$ $$\text{Estimated tax saved} = 100 \times 0.22 = \$22$$ $$\text{Gross pay} = 800 + 300 = \$1{,}100$$

Only the $100 premium — not the full $300 of overtime pay — is the deductible piece.

Example 2: Double time

Now suppose you earn $30 per hour, work 40 regular hours and 8 overtime hours at a 2.0 multiplier, and your marginal federal rate is 24%:

$$\text{Regular pay} = 30 \times 40 = \$1{,}200$$ $$\text{Overtime pay} = 30 \times 2 \times 8 = \$480$$ $$\text{Exempt premium} = 30 \times 1 \times 8 = \$240$$ $$\text{Estimated tax saved} = 240 \times 0.24 = \$57.60$$ $$\text{Gross pay} = 1{,}200 + 480 = \$1{,}680$$

Frequently asked questions

Is all of my overtime pay tax-free?

No. Only the overtime premium — the portion above your regular hourly rate — is treated as deductible. With a 1.5 multiplier, that is the “extra half,” so roughly one-third of your time-and-a-half overtime pay is the premium and the rest is taxed normally.

How is the tax-exempt premium calculated?

Multiply your hourly wage by the multiplier minus one, then by your overtime hours. At $20 per hour with a 1.5 multiplier and 10 overtime hours, the premium is 20 × 0.5 × 10 = $100.

Does this remove all taxes on the premium?

No. The rule is a federal income tax deduction only. Social Security and Medicare (FICA) taxes still apply, and state or local taxes are unaffected. The “estimated tax saved” here reflects federal income tax on the premium at your marginal rate.

Why do I enter a marginal tax rate?

The tax you save depends on the rate that applies to your next dollar of income. Deducting the premium lowers your taxable income, so the saving is the premium multiplied by your marginal federal rate — for example, 22% or 24%.

Is this an official calculation?

No. This is an educational estimate that follows the general design of the 2025 “No Tax on Overtime” deduction. Income limits, caps, phase-outs, and eligibility rules apply and can change, so check an official source or a tax professional for your exact situation.

To break your overtime pay into its regular and premium parts, use the overtime calculator, or convert between pay periods with the salary to hourly calculator.